We examine the role of non-economic partnerships in promoting international economic exchange. Since far-sighted countries are more willing to join costly international partnerships such as environmental treaties, environmental engagement tends to encourage international lending. Countries with such non-economic partnerships also find it easier to engage in economic exchanges since they face the possibility that debt default might also spill over to hinder their non-economic relationships. We present a theoretical model of these ideas, and then verify their empirical importance using a bilateral cross-section of data on international cross-holdings of assets and environmental treaties. Our results support the notion that international environmental cooperation facilitates economic exchange.
*Published:
Andrew K. Rose & Mark M. Spiegel, 2009. "Noneconomic Engagement and International Exchange: The Case of Environmental Treaties," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(2-3), pages 337-363, 03.
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